Correlation Between Sparinvest INDEX and Fundamental Invest

Can any of the company-specific risk be diversified away by investing in both Sparinvest INDEX and Fundamental Invest at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sparinvest INDEX and Fundamental Invest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sparinvest INDEX Globale and Fundamental Invest Stock, you can compare the effects of market volatilities on Sparinvest INDEX and Fundamental Invest and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sparinvest INDEX with a short position of Fundamental Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparinvest INDEX and Fundamental Invest.

Diversification Opportunities for Sparinvest INDEX and Fundamental Invest

-0.32

Correlation Coefficient

Sparinvest INDEX  Fundamental Invest

Very good diversification

The 3 months correlation between Sparinvest and Fundamental is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sparinvest INDEX Globale and Fundamental Invest Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Invest Stock and Sparinvest INDEX is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sparinvest INDEX Globale are associated (or correlated) with Fundamental Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Invest Stock has no effect on the direction of Sparinvest INDEX i.e., Sparinvest INDEX and Fundamental Invest go up and down completely randomly.

Pair Corralation between Sparinvest INDEX and Fundamental Invest

Assuming the 90 days trading horizon Sparinvest INDEX Globale is expected to generate 0.68 times more return on investment than Fundamental Invest. However, Sparinvest INDEX Globale is 1.47 times less risky than Fundamental Invest. It trades about 0.1 of its potential returns per unit of risk. Fundamental Invest Stock is currently generating about -0.08 per unit of risk. If you would invest  14,516  in Sparinvest INDEX Globale on October 8, 2024 and sell it today you would earn a total of  546.00  from holding Sparinvest INDEX Globale or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sparinvest INDEX Globale  vs.  Fundamental Invest Stock

Sparinvest INDEX Globale

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparinvest INDEX Globale are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Sparinvest INDEX is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Fundamental Invest Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundamental Invest Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Fundamental Invest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sparinvest INDEX and Fundamental Invest

The main advantage of trading using opposite Sparinvest INDEX and Fundamental Invest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparinvest INDEX position performs unexpectedly, Fundamental Invest can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fundamental Invest will offset losses from the drop in Fundamental Invest's long position.

The idea behind Sparinvest INDEX Globale and Fundamental Invest Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.